Ask The Money Coach

Posts Tagged ‘Credit Scores’

Question: I am a 23-Year-Old College Student with a Bad Debt of About $12,000 With American Express. I Believe the Statute of Limitations in Maryland is 3 Years. I Do Not Remember the Last Time I Made a Payment to Them. I Found a Receipt Showing a Payment in December 2006. But When I Called American Express, Their Records Don’t Go Back That Far. What Should I Do? And How do I Find Out When My Statute of Limitations Has Been Reached?

Answer: It’s kind of odd that American Express wouldn’t be able to track down this old debt that you had – especially considering it wasn’t chump change. It’s very likely, though, that the $12,000 was assigned to a collection agency or simply written off as uncollectable – especially since it was apparently more than three years ago and you were just 20 years old. As you were/are a college student, I’m assuming you weren’t making big bucks back then (or now) and Amex may have known that their chances were between slim and none, in terms of getting you to pay back what you owed. What to do now? Pull each of your credit reports from Equifax, Experian and TransUnion. You can get them online free of charge via www.annualcreditreport.com. See if that Amex debt shows up on your credit reports as a collection account, charge-off, judgment, or anything else negative. If not, do nothing. If so, contact the creditor/collection agency listed only if you are financially prepared to begin a repayment plan to pay off what you owed. Otherwise, do nothing.

The Statute of Limitations on Credit Card Debt

Lastly, here are a few ways to check the statute of limitations in your state. Each state has different statutes of limitations for past-due debts, depending on if the debt was based on a written contract, an oral contract, a promissory note, or an open account. Credit cards are usually categorized as open accounts. The statute of limitations for credit card debt ranges from 3 to 10 years, based on where you live. You can click the following link for a state-by-state list of statute of limitations. themoneycoach1.wordpress.com/2009/09/14/statute-of-limitations-on-debt/.

Alternatively, to check the statute of limitations on debts in your state, contact your State Attorney General’s Office or go to www.naag.org and click “The Attorneys General”. I checked for Maryland, since you mentioned that state and I believe that is where you live. You are correct that the statute of limitations there is three years. All the more reason, as I suggested, to just do nothing about that debt. Chances are no one is contacting you about it because the statute of limitations has expired and the debt is no longer legally enforceable.

Your Credit Rating

This does not mean, of course, that it can not still appear on your credit report. That’s another matter entirely. Negative information, such as late payments or collection accounts, can stay on your credit report for 7 years. If this info is on your credit report, rest assured knowing that because it is more than 2 years old, it is likely doing far less damage to your credit rating than it probably did more than three years ago when the account first went delinquent.  So if I were you, I wouldn’t worry excessively about it.

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The National Foundation for Debt Management (NFDM) is an excellent non-profit agency that can help you get your credit card debt under control.  You can trust that they are reputable and will do a good job. NFDM negotiates with your creditors on your behalf. In fact, they have already pre-negotiated with most creditors, so when you contact them (www.NFDM.org or 866-409-6336), they will be able to tell you what your new interest rates would be and what your total monthly payment would be to repay all your creditors using a debt management program.

Well, under the Fair Credit Reporting Act, the original lender is the one that is supposed to be noted on your credit report because that’s the creditor with whom you had a deal. Credit card companies and banks do have the right to sell uncollectable debts to bill collectors, and that is apparently what’s happened in your case. In fact, the debt appears to have been sold multiple times. I don’t think you’ll ever be able to get a credit reporting agency to change the creditor listed. But that shouldn’t really worry you because, frankly, it has absolutely no impact whatsoever on your credit rating or your credit score. Focus instead on the $525 debt that you’re trying to get cleared – or the $800 they’re trying to get you to cough up. Read this column and askthemoneycoach.com/2010/03/i-received-a-notice-from-a-lawyer-representing-a-credit-card-company-citibank-who-is-suing-me-for-a-delinquent-debt-i-took-your-advice-and-paid-off-all-my-delinquent-debts-unfortunately-this-is-m/” target=”_blank”>this one too about how to negotiate with bill collectors.

If you’re having trouble paying your bills on your own, yes, a debt management company can help. And contrary to popular opinion, simply enrolling in a debt management plan does not impact your credit score. Read this article on the differences between debt management and debt settlement companies, and learn why I strongly recommend debt management firms. One excellent non-profit organization is the National Foundation for Debt Management (www.NFDM.org).

Except under certain circumstances, I generally don’t recommend that people cancel credit cards, especially in the current environment because doing so can hurt your credit scores. Listen to this podcast answer for more information on how that happens. Regarding paying the minimums on your other cards, yes, that can be a smart strategy if you want to put more effort into knocking out that Visa card more quickly. Read this article also, in which I offer negotiating tips to get your credit card interest rates lowered. However, if the company doesn’t budge on the high interest rate or those nasty monthly/annual fees, you might consider canceling the card — but only if you have another credit cards and other accounts with a longer credit history. If you don’t have another card, just wait until you get a zero balance on your Visa card. Then apply for a national brand credit card with no annual fee and a decent rate. When you get approved, then you can cancel the old Visa card. This way, you won’t be held hostage to a credit card that isn’t doing you much good.